Qualcomm has been expecting to ride a 5G smartphone growth wave for a while now, and it finally looks to be taking hold as the San Diego wireless technology giant on Wednesday issued a strong forecast for the current quarter ending in September.
In addition, Qualcomm announced the unexpected settlement of a long-running patent licensing dispute over patent fees with China's Huawei. While details of the deal are confidential, Huawei will pay Qualcomm $1.8 billion for back royalties owed for 2019 and the first six months of calendar 2020.
Huawei previously paid some royalties to Qualcomm while negotiations were ongoing in a dispute dating back more than two years. China's smartphone leader, Huawei has begun paying ongoing licensing fees again to Qualcomm under new terms.
"With the signing of the Huawei agreement, we are entering a period where we have multi-year licensing agreements with every major handset (maker), said Chief Executive Steve Mollenkopf in a conference call with Wall Street analysts.
The news sent Qualcomm shares up nearly 12% in extended after-hours trading.
For the quarter ending June 30, Qualcomm posted results ahead of analysts' expectations. Revenue came in at $4.89 billion and adjusted earnings hit $982 million, or 86 cents per share.
Wall Street analysts had forecast revenue of $4.8 billion and adjusted earnings of 70 cents per share.
While smartphone sales globally have been hit hard due to the COVID-19 pandemic, higher priced 5G smartphones are gaining traction, particularly in China. That helped offset declining sales of 4G devices.
In June, more than 60% of all smartphones sold in China were 5G, said Mollenkopf.
"In China, just midway through the calendar year and despite the impact of COVID-19, 5G now represents the majority of domestic mobile phone shipments," he said. "We are expecting the next inflection point in our 5G ramp to begin in our fiscal fourth quarter, with strong year-over-year growth in revenue and earnings per share."
Some of that growth could come from a new 5G iPhone from Apple, though Qualcomm hinted of potential delays in the rollout of an unnamed flagship smartphone at large volumes.
Analysts have been speculating that the launch of new 5G iPhones could be pushed back slightly from Apple's usual schedule. Qualcomm settled a long-running legal fight with Apple in April 2019 and is expected to supply 5G chips used in the upcoming iPhones.
But there is 5G momentum regardless, the company said. Qualcomm now has more than 660 devices announced or in development with its 5G Snapdragon semiconductors, up from 375 devices in March. It expects to sell 145 million to 165 million chips in the current quarter, compared with 130 million chips shipped in the June quarter.
Looking ahead, Qualcomm forecast revenue of $7.3 billion to $8.1 billion for the September quarter under Generally Accepted Accounting Principles, which includes the Huawei settlement. Earnings are forecast at $2.12 to $2.32 per share.
Excluding the $1.8 billion gain from Huawei, Qualcomm predicts sales of $5.5 billion to $6.2 billion for the September quarter. Earnings should range from $1.05 to $1.25 per share.
Qualcomm announced financial results after markets closed. Its share price ended Wednesday at $93.03 but surged to $103.78 in extended trading.
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